More important than the original public letter against renting to Arabs is the now public opinion of Rav Elyashiv, recognised world-wide as the generation's top Halchic authority. He condemned the racist letter, and his view is shared by sane Jews everywhere. You can reject a prospective renter because of his/her undesirable lifestyle, but not because of his/her race. Gentiles have always lived in Israel, even in the Biblical era.
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from the article: Hundreds of rabbis around the world decry anti-Arab religious ruling